Department of Mines and Mineral Resources sunset hearing

              1700 W. Washington
Phoenix, AZ. 85007-2848
Office (602) 926-5480
FAX (602) 417-3134
Arizona House of Representatives
House Majority Research
MEMORANDUM (\
,~ l-
.YltL,/ Kathl Knox ....,/ V~·
Deputy Director of Research
Legislative Research Analyst,
Natural Resources and.Agriculture Committee
To: JOINT LEGISLATIVE AUDIT COMMITTEE
Re: Department of Mines and Mineral Resources Sunset Hearing
Date: November 17,2005
Attached is the final report of the sunset review of the Department of Mines and Mineral
Resources, which was conducted by the House of Representatives Natural Resources and
Agriculture and Senate Natural Resources and Rural Affairs Committee of Reference on
September 21,2005.
This report has been distributed to the following individuals and agencies:
Governor ofthe State of Arizona
The Honorable Janet Napolitano
President of the Senate
Senator Ken Bennett
Speaker of the House of Representatives
Representative Jim Weiers
Senate Members
Senator Marilyn Jarrett, Cochair
Senator Marsha Arzberger
Senator Timothy S. Bee
Senator Robert Blendu
Senator Robert Cannell
House Members
Representative Russ Jones, Cochair
Representative Cheryl Chase
Representative Ann Kirkpatrick
Representative John Nelson
Representative Tom O'Halleran
Arizona Department of Mines and Mineral Resources
Department of Library, Archives & Public Records
Auditor General
Senate Republican Staff
Senate Research Staff
Senate Democratic Staff
Senate Resource Center
House Majority Staff
House Research Staff
House Democratic Staff
Chief Clerk
COMMITTEE OF REFERENCE REPORT
House of Representatives Committee on Natural Resources and Agriculture and Senate
Committee on Natural Resources and Rural Affairs Committee of Reference
ARIZONA DEPARTMENT OF MINES AND MINERAL RESOURCES
To: JOINT LEGISLATIVE AUDIT COMMITTEE
Representative Laura Knaperek, Co-Chair
Senator Robert Blendu, Co-Chair
Date: September 21,2005
Pursuant to Title 41, Chapter 27, Arizona Revised Statutes, the Committee of Reference,
after performing a sunset review and conducting a public hearing, recommends the
following:
The Department ofMines and Mineral Resources be continuedfor ten years
and that continuation legislation address the issues raised during the committee of
reference discussions.
COMMITTEE OF REFERENCE
Representat£·ve Russ Jones, Co-Chair
CZ¥()I~
Senator Robert Cannell
November 17, 2005
COMMITTEE OF REFERENCE REPORT:
ARIZONA DEPARTMENT OF MINES AND MINERAL RESOURCES
Background
Pursuant to Section 41-2953, Arizona Revised Statutes, the Joint Legislative Audit
Committee (JLAC) assigned the sunset review of the Arizona Department of Mines and Mineral
Resources to the Senate Natural Resources and Rural Affairs and the House of Representatives
Natural Resources and Agriculture Committee ofReference.
The Arizona Department ofMines and Mineral Resources (DMMR) was established in
1939 as an executive agency independent of the Legislature. The objective of the DMMR is to
assist in the exploration, development and exploitation of the State's mineral resources. The
duties ofthe DMMR are outlined in ARS 27-102, as follows:
Promote development of mineral resources.
Conduct studies ofthe economic problems of prospectors and small mines.
Maintain archival information and a mineral museum.
Provide quality mining data.
Make surveys of potential economic mineral resource and conduct field and other
investigations.
Serve as a center of mining information.
Publish and distribute information and data.
Cooperate with related state and federal agencies such as the State Geologist at the Arizona
Geologic Survey and the State Land Department.
Oppose congressional acts favoring reciprocal or duty free imports of foreign minerals.
Use its authority in other ways to assist in exploration and development of mineral resources
in Arizona.
The DMMR maintains archival information on mining claims and mineral resources and
operates the mineral museum. The DMMR is statutorily required to maintain: 1) an information
bank and library of mineral and mining information including books, periodicals, films,
videotapes and individual mine files; 2) underground mine map repository files, mining district
data and an archive of mine data; 3) a mineral museum as the state depository for collecting,
cataloging and displaying mineral specimens of various ores, gemstones, lapidary material and
other valuable mineral specimens.
Committee ofReference Sunset Review Procedures
The Committee of Reference held one public hearing on September 21,2005, to review
the DMMR response to the sunset factors as required by A.R.S § 41-2954, subsections D and F,
and to receive public testimony (See Attachment 4). Testimony was received from Dr. Madan
M. Singh, Director ofDMMR, interested stakeholders and members of the public.
2
November 17, 2005
Dr. Singh described the agency's functions and effectiveness at promoting the
development of mining and mineral resources in the state of Arizona. He discussed the
publications ofthe Department, the presentations the Department has given and the number of
visitors to the Mine Library and Museum. Dr. Singh also spoke of the limited budget that the
Department has to work with. He explained that the majority of the DMMR budget is
legislatively appropriated, but that a small portion of the budget is derived from proceeds from
the museum gift ship. He also explained, of the money that is appropriated by the legislature,
approximately half is allocated to pay for rent on the building.
Other interested parties testified in support ofthe continuation ofthe DMMR. Richard
Bark, representing Phelps Dodge, Jerry Haggard, representing himself, Chuck Bentzen,
representing himself, Sydney Hay, representing the Arizona Mining Association and Arizona
Mining and Industry Get Our Support (AMIGOS), Bryan Wilson, representing St. Genevieve
Resources Limited, Fred Brost, president of Mining and Environmental Consultants, Krishna
Parameswaraw, representing Asarco LLC, Dave Ridinger, representing the Governing Board of
the DMMR, and Rich London and Larry Fellows, representing themselves, also testified at the
meeting.
ColtUtlittee ofReference Recommendations
The Committee of Reference recommended that the Department of Mines and
Mineral Resources be continued for ten years and that continuation legislation address the
issues raised during the committee of reference discussions.
3
November 17, 2005
SUNSET REPORT REQUIREMENTS
Pursuant to Section 41-2954 subsection F, Arizona Revised Statutes
*** Note- The following answers are a summary ofthe answers provided by the Department.
Please see Attachment 2 for the complete DMMR answers to the sunsetfactors required by
A.R.S. § 41-2954 subsection D and F.
I. Identification of the problem or need that the agency is intended to address.
The DMMR is intended to attract mining and exploration companies to Arizona
and to promote the development of Arizona's mineral resources. The DMMR maintains
a database of unpublished reports and maps; a comprehensive information bank and
library of mineral and mining related maps and literature; information on commodities
and markets; target areas for exploration and a list of properties for acquisition and
development. It also maintains a mineral museum.
II. Statement of the objectives of the agency and its anticipated accomplishments.
According to the DMMR, its objectives are to:
1) Continue to provide current and quality mining information.
2) Make the DMMR data knowledge widely available and easily accessible
through an expanded use of the Internet that will include preservation of the
aging library and mine files.
3) To see the Arizona mining industry prosper.
4) Improve the museum to enhance the experience and knowledge gained by its
visitors.
III. Identification of any other agencies with similar, conflicting or duplicate objectives
and an explanation of the manner in which the agency avoids duplication or
conflicts with other such agencies.
According to the DMMR, there are two other agencies with objectives or names
that appear to be similar, but these agencies perform dramatically different tasks. Those
are the office of the State Mine Inspector and the Arizona Geological Survey.
"The Mine Inspector is a regulatory agency intended to enforce the regulations
governing producing mines for the health and safety of the miners; oversee the
abandoned mine program and administer mined land reclamation.
"The Arizona Geological Survey furnishes the public with data about the state's
geologic setting, describes and maps the rocks and soils, performs investigations related
to the field and controls and manages the laws and policies pertaining to oil, gas, helium
and geothermal resources. The Survey looks at mineral deposits as they exist in a broad
geologic setting and is primarily non-regulatory, although it does administer the Oil and
Gas Conservation Commission, which is regulatory.
4
November 17, 2005
"The DMMR, by contrast, is a service agency that provides assistance in
exploration, development and exploitation of the state's mineral resources. The DMMR
gathers economic data, publishes mineral resource information and cooperates with mine
owners, exploration companies, mining companies and government land agencies to help
develop the industry and contribute to the economy of the state."
IV. Assessment of the consequences of eliminating the agency or of consolidating the
agency with another agency.
According to the DMMR, "the Department serves a valuable purpose in keeping
the mining industry active and without help from the Department, new investment in
Arizona's mineral industry would dwindle. In addition, other groups would suffer by not
having the DMMR historical data to call upon for land use planning and management
decisions. Small mine operators and out of state mining interests would lose a guide to
the mineral resources of the state."
DMMR documents provided to the Committee of Reference state that:
"Eradication of the museum would strip the state of one ofthe finest mineral collections
in the West. Consolidating the museum with another agency would dilute or eliminate
the fundamental message the museum delivers so well- that mining is necessary, that it
is done in an environmentally responsible manner and that the US is dependent on
Arizona's mineral deposits."
Atfilchments
1. Letter from Rep. Russ Jones to DMMR requesting information
2. Sunset factors pursuant to A.R.S § 41-2954, subsections D and F.
3. Meeting Notice
4. Minutes of Committee of Reference Meeting
5. Spreadsheet of statutory changes discussed at the meeting held October 10, 2005.
5
Attachment #1
Letter from Rep Jones to the
Department of Mines and Mineral
Resources
RUSSELL L. JONES
1700 WEST WASHINGTON, SUITE H
PHOENIX, ARIZONA 85007-2844
CAPITOL PHONE: (602) 926-5273
CAPITOL FAX: (602) 417-3124
TOLL FREE: 1-800-352-8404
rjones@azleg.state.az.us
DISTRICT 24
July 28, 2005
Susan Celestian, Acting Director
Arizona Department of Mines and Mineral Resources
1502 West Washington
Phoenix, AZ 85007
Dear Director Celestian:
COMMITTEES:
NATURAL RESOURCES AND
AGRICULTURE,
VICE-CHAIRMAN
COUNTIES, MUNICIPALITIES AND
MILITARY AFFAIRS
TRANSPORTATION
The sunset review process prescribed in Title 41, Chapter 27, Arizona Revised Statutes,
provides a system for the Legislature to evaluate the need to continue the existence of state
agencies. During the sunset review process, an agency is reviewed by a legislative committee
of reference. On completion of the sunset review, the committee of reference recommends to
continue revise, consolidate or terminate the agency.
The Joint Legislative Audit Committee has assigned the sunset review of the Arizona
Department of Mines and Mineral Resources to the committee of reference comprised of
members of the House of Representatives Natural Resources and Agriculture Committee and
the Senate Natural Resources and Rural Affairs Committee.
Pursuant to AR.S. § 41-2954, the committee of reference is required to consider certain factors
in deciding whether to recommend continuance, modification or termination of an agency.
Please provide your response to those factors as provided below:
1. The objective and purpose in establishing the agency.
2. The effectiveness with which the agency has met its objective and purpose and the
efficiency with which it has operated.
3. The extent to which the agency has operated within the public interest.
4. The extent to which rules adopted by the agency are consistent with the legislative
mandate.
5. The extent to which the agency has encouraged input from the public before adopting its
rules and the extent to which it has informed the public as to its actions and their
expected impact on the public.
6. The extent to which the agency has been able to investigate and resolve complaints that
are within its jurisdiction.
7. The extent to which the Attorney General or any other applicable agency of state
government has the authority to prosecute actions under the enabling legislation.
8. The extent to which the agency has addressed deficiencies in its enabling statues that
prevent it from fUlfilling its statutory mandate.
9. The extent to which changes are necessary in the laws of the agency to adequately
comply with these factors.
10. The extent to which the termination ofthe agency would significantly harm the public
health, safety or welfare.
11. The extent to which the level of regulation exercised by the agency is appropriate and
whether less or more stringent levels of regulation would be appropriate.
12. The extent to which the agency has used private contractors in the performance of its
duties and how effective use of private contractors could be accomplished.
Additionally please provide written responses to the following:
1. An identification of the problem or the needs that the agency is intended to address.
2. A statement, to the extent practicable, in quantitative and qualitative terms, of the
objectives of such agency and its anticipated accomplishments.
3. An identification of any other agencies having similar, conflicting or duplicate objectives,
and an explanation of the manner in which the agency avoids duplication or conflict with
other such agencies.
4. An assessment of the consequences of eliminating the agency or of consolidating it with
another agency.
In addition to responding to the factors in AR.S. § 41-2954, please provide the committee of
reference with a copy of your most recent annual report. Your response should be received by
September 1, 2005 so we may proceed with the sunset review and schedule the required public
hearing. Please submit the requested information to:
Kathi Knox
Arizona House of Representatives
1700 West Washington
Phoenix, AZ 85007
Thank you for your time and cooperation. If you have any questions, please feel free to contact
me at 6902-926-5273 or Kathi Knox, the House of Representatives Natural Resources and
Agriculture Committee Analyst, at 602-926-5480.
Sincerely,
Russell Jones,
State Representative
Chair, Natural Resources and Agriculture Committee of Reference
Attachment #2
Sunset factors pursuant to
A.R.S § 41-2954, subsections D and F
Arizona Department of Mines and Mineral Resources
SUNSET REVIEW -- 2005
1. The objective and purpose in establishing the agency.
The objective of the Department of Mines and Mineral Resources (DMMR) is to assist in the
exploration, development and exploitation of the State's mineral resources. The purpose of the
Department ofMines and Mineral Resources is to assist in the exploration and development of the
State's resources.
The Department of Mines and Mineral Resources helps prospective mining companies, exploration
geologists, and government agencies in diverse ways to mine the minerals that exist in Arizona. It also
has an educational component, so that students and the public-at-large understand the critical role of
minerals in our civilization. The Department does not register entities, impose taxes or penalties, or
charge fees for our services.
Currently, there is a perception among some persons that mining merely scars the landscape. Few
people realize that every citizen of the US consumes 3.7 million pounds of minerals, metals, and fuels in
hislher lifetime, including over 32,000 pounds (16 tons) of salt, 5.9 million cubic feet of natural gas, and
more than 586,000 pounds (293 tons) of coal. An average house (1,600 square feet) has over 250,000
pounds (125 tons) of minerals and metals, including over 400 pounds of copper, 160,000 pounds (80
tons) of sand and gravel, and 4,000 pounds (2 tons) of cement. Thus the Department strives to help
maximize the contribution from Arizona's mineral resources.
2. The effectiveness with which the agency has met its objectives and purpose and the
efficiency with which it has operated.
Considering the size of the Department (only seven FTEs) and limited budget, consisting basically
of rent plus salaries, the number of functions that the staff has been able to cover is truly astonishing.
Hence, it may be stated, without fear of contradiction, that the Department has been both effective and
efficient. This can be attributed to a small but dedicated staff and a core of devoted volunteers.
Remembering that during most of the last year even though we were understaffed, the work
accomplished is amazing. These accomplishments are detailed in our Annual Report, which is appended
to this document.
The Department collects and analyzes mineral information as it becomes available, catalogues it,
and then disseminates it to the public. It also provides data to various government agencies. It has
developed a website that had over 407,000 hits last year. Economic surveys of various minerals for both
capital investment and prospectors were conducted. Mining data were evaluated and given to legislative,
federal, state, county, and municipal agencies. At least 17 talks were given, plus a report for the
Prospectors and Developers Association of Canada (PDAC) International Conference - which is the
premier meeting for mining and exploration companies.
The Mine Library has more than 11,000 records and over 5,000 hard copy files. There are over
1,700 mine maps that have been catalogued, with 5,000 awaiting treatment in the map archives. The
photo archives have over 4,000 items with many ofthese being historic. There were 10 publications
prepared, not counting the report presented at PDAC. The staffhas published documents for the Bureau
of Land Management for obtaining mineral rights, written a review article for the U.S. Geological
Survey, assisted the Federal Bureau ofInvestigation with a case in Sierra Vista, the Bureau ofIndian
Affairs with information on uranium, worked with the State Land Department about trust land,
responded to inquiries from the Arizona Geological Survey on matters related to mining and mineral
resources, identified dubious mining information for the Securities Division ofthe Corporation, gave the
Arizona Department of Environmental Quality information on the chemicals used in mineral recovery at
specific locations, and provided information to many other organizations.
Sunset Review 2005 - Arizona Department ofMines and Mineral Resources
The Museum had nearly 42,000 visitors last year and had over 22,000 students tour the facilities.
Staff visited 24 schools that were unable to come to our facilities. Classes were offered in the lapidary
shops on faceting, gem identification, sphere-making, and other lapidary skills. Over 10,000 kits with
rock specimens have been distributed to teachers over the years to facilitate instruction in and
understanding of mineral resources and the earth sciences. In addition, 21 events were organized to
underscore the role of minerals. The Museum has participated in 10 gem and mineral shows throughout
the State, and even one in California. It has maps, mineral identification kits, and screen savers for sale
and flyers on specific topics.
The chart below presents the budgets, mineral production, and staffing for Arizona and three
neighboring states. Two of these have production values that are similar to those of Arizona. Utah has
about half of our production. The staffing and budget figures are indicative of our efficiency.
Comparison of Budgets for the Department of Mines
and Mineral Resources with Other States.
State Budpet Mineral Production No. of Emnlovees
Arizona
Dept. Mines and Mineral Resources $658,400 7
(non-regulatory) $3.3 billion
Geological Survey (non-reg & reg) $772,000 11
Total $1,430,040 20
Nevada
Bureau of Mines & Geology 26
(non-regulatory) $1,703,689 $3.0 billion
Their Division of Mines ---2
is funded by a severance tax. 35
California
Geological Survey $7,800,000 $3.3 billion 212
(regulatory and non-regulatory)
Utah
Geological Survey $2,127,000 59
(non-regulatory) $1.5 billion
Oil, Gas & Mining Division $I.l98,000 ~
(regulatory) $3,325,000 141
The other western sates have mineral productions of less than a billion dollars and have staffs from 16 to 59. Funding goes
up to $3.8 million.
It should be borne in mind that no two states have similar laws and organizations, hence direct comparisons are difficult.
3. The extent to which the agency has operated within the public interest.
The primary function of the Department of Mines and Mineral Resources is to encourage the
development of the minerals industry in Arizona. It does this by collecting data about mineral
occurrences in the State and making them available to the public and to the mining and exploration
companies. This basic knowledge of where to look for further deposits helps these entities to focus their
resources in areas where the chances of success are greatest. Over a period of time some of these
ventures flourish into large and successful mining operations. This constitutes a notable contribution to
the economy of the State.
Mining has been a vital industry for Arizona since its settlement. Prospectors and business people
flocked to the territory to explore and exploit its mineral wealth. Mining activity continues to be
important to the State, especially in the rural areas. Mining provides high-paying jobs and a significant
2 Sunset Review 2005 - Arizona Department of Mines and Mineral Resources
tax base for the schools and other facilities. In 2004, the mining of construction materials generated over
25,000 jobs, including those due to the indirect impact. The copper industry provided 22,400 jobs, again
including the indirect component. This is a sizeable source of revenue for the local governments.
In 2004 alone, mining has directly contributed over $3.3 billion to the State's economy, excluding
exploration and development. It may be estimated that this resulted in nearly $7 billion including the
indirect impact. The mining industry is currently in an upswing. In addition, copper mining alone has
major contributions to make, since it is expanding. For example, the Safford Operation of Phelps Dodge
will spend $570 million before it comes into production in 2007. Resolution Copper is expected to
invest an estimated $2 billion in developing its new deposit near Superior, before it produces even one
pound of copper. Construction is very strong throughout the state and, hence, construction-materials
mining is at an all time high. Thus, expansion of existing mines and starting of new operations are
increasing demand for ADMMR's services.
4. The extent to which rules adopted by the agency are consistent with the legislative
mandate.
Not Applicable. The Department is a non-regulatory agency and does not promulgate rules that
affect the industry or the public-at-Iarge. The objectives and functioning of the Department is consistent
with the legislative mandate to encourage prudent capital investment and development of the minerals
industry in the State.
5. The extent to which the agency has encouraged input from the public before adopting
its rules and the extent to which it has informed the public as to its actions and their
mandate.
Not Applicable. Since the Department is non-regulatory in character it does not formulate rules.
Hence, there is no need for direct input from the public. However, the Department is proactive in
seeking the opinions of both the industry and other stakeholders and aggressively works toward
achieving the maximum benefit for Arizona.
A Board of Governors, consisting of five members, governs the Department. The members ofthis
Board are appointed by the Governor of the State, one each year. These members are selected from the
public and have an interest in the mineral resources of the State. The Board sets the policies of the
Department within the statutory and budgetary limitations. This mechanism provides public input in an
indirect manner.
6. The extent to which the agency has been able to investigate and resolve complaints
that are within its jurisdiction.
Not Applicable. Again, the nature of the Department is such that it does not have jurisdiction over
the public. The Department has considerable expertise in the field of mineral resources and does provide
assistance to several State and federal agencies. Investors and regulators are often first alerted and then
later assisted by our knowledge, investigation, and analysis.
Often these efforts are related to dubious claims of mineral properties, but on occasion these help
locate likely criminal activity in the area. In the past year, the Department has worked with the
Securities Division of the CorporationComrnission, the Office of the State Attorney General, Mohave
County Sheriffs Office, the State Land Department, the Office of the State Mine Inspector, the Federal
Bureau of Investigation, the Bureau of Land Management, and security and law enforcement agencies of
other states and countries.
When the prices of mineral commodities are on the upswing, as is currently the case, or when the
return in the general investment market is poor, the number of suspect activities related thereto multiply.
Unfortunately, the resources of the Department are limited, which tends to restrict the services the
Department can provide.
Sunset Review 2005 . Arizona Department of Mines and Mineral Resources 3
7. The extent to which the Attorney General or any other applicable agency of state
government has the authority to prosecute actions under the enabling legislation.
Not Applicable. It is not within the purview ofthe Department to prosecute anyone directly. The
primary purpose ofthe agency is to promote investments in the minerals industry in Arizona. However,
it cooperates with the Attorney General, the Securities Division of the Corporation Commission, Federal
Bureau ofInvestigation, Department of Treasury, Securities and Exchange Commission, and others to
investigate fraudulent activity related to mining securities and offerings. The technical expertise that the
Department possesses is necessary to differentiate between legitimate risk in mining ventures and
outright fraud. On occasion the staff has also aided the Drug Enforcement Agency when requested, such
as when a mining company front is being used to cover nefarious drug activities.
8. The extent to which the agency has addressed deficiencies in its enabling statues
that prevent it from fulfilling its statutory mandate.
The enabling legislation provides a broad mandate for the Department and its operations. However,
if some members of the general public fail to understand the importance of mining, or the Department's
role in promoting this vital industry, this probably reflects on the Department's failure to convey this
message, but not a deficiency in our enabling statutes. In the forthcoming year, this will be one focal
point for the Department.
Often the investing public, market regulators, and stock brokers make inquiries about advertised
mining properties. The Department provides whatever information it has on hand. However, this issue
is a sensitive one and further addressed in the next section.
Gone are the days when Henry Wickenburg was able to find a rock on the surface and throw it at a
vulture to find it split open and expose gold, or Jose Jerise could pick up some samples without even
realizing the amount of gold in them, or when Bill Hope found a globe-shaped nugget of silver which
later led to the settlement of the community of Globe. New deposits are now found deep underground,
which require sophisticated equipment and considerable expertise and expense. Although the need to
explore continues, the resources allocated to the Department to assist remain very restricted. The
Department, however, does preserve, organize, and evaluate data that it obtains from various sources
and makes it available to potential explorationists, mine operators, and mineral consumers as they call
upon our services.
The costs for developing and operating mines are substantial; large mines offer economy of scale
and operation. There is a global competition for the extraction of metals that puts small miners at a
disadvantage. Hence, the number of small miners has decreased over time. Small mines still exist for
the extraction of gemstones; niche commodities such as kitty litter (and other absorbents); pigments for
paint; sand and gravel; and crushed stone. Small miners can also operate during times of high
commodity prices. The Department cooperates with these entities and with new companies that are
interested in initiating new ventures, to the extent the resources permit. Small operators have an
acquisition/exploration advantage, however, by virtue of being small and able to react quickly.
Additionally, they are often not risk adverse.
9. The extent to which changes are necessary in the laws of the agency to adequately
comply with these factors.
Statute 12 states, "The Department shall oppose duty-free imports of foreign minerals." This relates
to fees on imported materials and is outdated, since free trade is the current policy of the federal
governrnent. Examples of these agreements include GAAT, NAFTA, and the recently passed CAFTA.
Hence, it should be deleted.
In 1997, the Department, and some of its staff, were sued personally for $27 million because they
had reported the total lack of discovery of a mining operation. In fact, this was based on field sampling,
done by the Department staff in 1994, and assay results by an independent laboratory. Yet the Maricopa
Superior Court ruled in favor of the plaintiff and decided that the Department does not have the statutory
authority to predict the likelihood of success or economic viability of a particular mining operation, or to
opine as to the value of the stock in a mining company.
4 Sunset Review 2005 - Arizona Department of Mines and Mineral Resources
It might be noted that by the next year, with no proof of discovery emerging and with NASDAQ
and others investigating, that company's stock had slumped and finally, in 2000, the remaining stock
was sold for $20,000 in Bankruptcy Court. This validates the assessment of the property by Department
staff.
In view of the above and the Department's statutory duty to "provide quality mining data,
evaluation, and assistance " and further to "conduct studies of economic problems " the
Department requests that the Legislature more clearly define the authority that the Department
employees have to evaluate properties may be and the extent to which the information provided to the
public.
A suggested mechanism is to change ARS 27-102(A) (4) to read as follows:
"4. Provide quality mining data, evaluation and assistance relating to mineral development to the
public, legislature, andfederal, state, county and other government agencies."
The italics are changes from the original as it exists.
It is further suggested that the following or similar clause be added:
"Employees and staff, including the director and the board, of the department shall be immune from
personal liability with respect to acts done and actions taken in good faith, within the scope of their
authority. "
Similar clauses occur in other agency authorizations. For example, ARS 27-121 (F) from the
statutes for the State Mine Inspector states "Any claim or action against the mine inspector or the
inspector's deputies, agents or employees in their official capacity as described in this title shall be
brought against the state of Arizona and not against the mine inspector, deputy, agent or employee
individually."
10. The extent to which the termination of the agency would significantly harm the
public health, safety or welfare.
The ultimate result of closing the Department of Mines and Mineral Resources would be disastrous
for the mining industry and thus the State of Arizona. It would severely hamper the development of new
mineral resources in the State and adversely affect those that are currently in operation. The current and
future producers and consumers of minerals often call on the Department for information and assistance.
The Department has supplied various types of information for the new developments at Phelps Dodge's
Safford and the Resolution Copper mines that will become productive in the forthcoming years.
Prospectors or companies interested in exploring or developing minerals in the State can contact the
Department to find previous exploration data and feasibility, possible locales for specific commodities,
and obtain overall guidance in getting started toward exploring and starting a mine. Recently, the
Department has been inundated with calls from various entities regarding ASARCO, since they have
declared bankruptcy.
The Mining and Mineral Museum is an integral and important part of the Department. The State
can be proud of having one of the best mineral collections in the country. It helps the public understand
the critical role of minerals to our society in general and to Arizona in particular. It serves as an Arizona
statescience standards-based educational channel for children in the K-12 group and instills an interest
in geology and the minerals industry. Each year over 20,000 students visit the Museum. By providing
access to specimens and ore suites from deposits inaccessible due to unsafe conditions or flooded
workings, the displays, and the extensive cataloged non-displayed reference collection, are of great
value to prospectors, mineralogists, professional geologists, mining engineers, and other researchers.
The Museum offers an outreach program that provides talks and classes in rural schools. Minerals,
rocks, and printed materials are assembled into educational kits and distributed to teachers to help them
convey knowledge about minerals and mining to the students. To date over 10,000 kits have been
handed out. The Museum provides teacher workshops, attended by teachers and home-schooling
parents. Classes in lapidary, silversmithing, and mineralogy are very popular. The Department conforms
to the American With Disabilities Act, and accommodates such persons in classes and museum tours.
Although no formal agreements exist with the State Universities at this time, we would like to
initiate cooperation with their libraries and other areas of common interest.
Sunset Review 2005 - Arizona Department of Mines and Mineral Resources 5
11. The extent to which the level of regulation exercised by the agency is appropriate
and whether less or more stringent levels of regulation would be appropriate.
Not Applicable. The Department is a non-regulatory agency.
12. The extent to which the agency has used private contractors in the performance of
its duties and how effective use of private contractors could be accomplished.
Private contractors have been used in the past for engineering design, especially for the Museum
building. The Department also has used outside printing companies and photo reproduction facilities.
Generally, there are insufficient funds for much work by contractors.
Most of the work performed by the Department involves collecting, analyzing, and disseminating
technical data related to the minerals industry. This is done almost entirely in-house. The Department
also collects specific mineral specimens and has a strong educational component. It has exceptional
capabilities to execute these duties.
Responses to Additional Questions
1. An identification of the problem or the needs that the agency is intended to address.
The Department is intended to attract mining and exploration companies to Arizona rather than
going elsewhere in their search for, and development of deposits of, raw materials. There is also the
need to educate some segments of the general public that view mining as being unnecessary to society.
The critical role of minerals in our civilization and their key role in our standard of living is inadequately
understood.
The objective of the Department is to promote the development of Arizona's mineral resources.
This is accomplished through teclmical research, field investigations, compilation of information into a
mineral occurrence database, and disseminating information through publications, personal contacts, and
seminars. The staff, of mining engineers and geologists, assists mining and exploration companies,
prospectors, and others interested in Arizona's minerals with land acquisition, exploration, mine
development, mineral processing, financing, government regulations, and marketing. It also provides
assistance that is tailored to meet the diverse needs of the public. This assistance includes maintaining a
database of unpublished reports and maps; a comprehensive information bank and library of mineral-and
mining-related maps and literature; information on commodities and markets; target areas for
exploration, and a list of properties for acquisition and development. The Department can facilitate
dealing with regulatory agencies; publish survey and technical reports; maintain and operate an
exceptional museum; and educate school children and the public about minerals and their critical role in
society.
The Department serves as a one-stop shop for exploration and mining companies that are
contemplating investing in the Arizona minerals industry. Without such an agency the State
would be signaling to mining-related firms that the State is indifferent to the development of new
resources.
2. A statement, to the extent practicable, in quantitative and qualitative terms, of the
objectives of such agency and its anticipated accomplishments.
1) Continue to provide current and quality mining information to a rapidly changing world.
The Department is essentially a service agency. Therefore, it is sometimes difficult to quantify its
achievements. For example, just recently ASARCO has had its workers go on strike and it has declared
Chapter 11 bankruptcy. We have responded to numerous calls from brokers and other entities regarding
their production capabilities, other Arizona assets, as well as possible liabilities. Individuals and mining
companies' representatives come to our offices to review reports and maps, and discuss properties with
the goal of perhaps making offers to purchase them. This is time-consuming for the staff, but if the
mines are recapitalized they could produce copper again at their full potential. This would not only
gainfully employ the miners that are working there, but also resume the generation of revenue for the
mine suppliers as well as State and local governments.
6 Sunset Review 2005 - Arizona Department of Mines and Mineral Resources
2) To make our data and knowledge widely available and easily accessible through an
expanded use of the Internet. This will include preservation of the aging library and mine file
information for use into the 21st century.
With restricted funding and lack of adequate staff, the Department has worked diligently towards
digitizing the data on exploration and mineral deposits in the State and putting this data on its website.
This has decreased the number of office visitors and requests for publications. As increasingly more
information becomes available on the Internet it frees staff time for research and less routine tasks and
mqUInes.
3) To see the Arizona mining industry prosper, although recognizing that it is influenced and
sometimes delayed by external events.
Many of the results of the efforts of the Department are indirect and often delayed by years. For
instance, the current activity to develop the copper deposits in Safford by Phelps Dodge had to wait for a
land exchange to be approved by the US Department of the Interior and for copper prices to rise. Now,
however, Phelps Dodge anticipates spending $570 million for development expenses even before
production starts. Similarly, cooperation with Magma Copper Company during the early and mid-1980s
has now led to Resolution Copper developing a deposit near Superior, with estimated expenses of nearly
$2 billion before any copper is produced.
4) Improve the Museum to enhance the experience and knowledge gained by its visitors.
A goal of the Museum is to have high visitation, and last year we had about 42,000. This number
has gradually increased every year, in spite of the admission charge that has been instigated by the
Legislature. The staff also encourages students to go through the museum, with over 22,000 having
visited last year alone. In addition, the staff present talks at various schools and organizations in the
State. This leads to interest in geology and mining in the upcoming generation. Work continues to
improve the quality of both internal and external displays.
3. An identification of any other agencies having similar, conflicting or duplicate
objectives, and an exploration of the manner in which the agency avoids duplication or
conflict with other such agencies.
There are only two agencies with objectives or names that may appear to be similar, but these
agencies perform dramatically different tasks. These are the office of the State Mine Inspector and the
Arizona Geological Survey.
The Mine Inspector's responsibilities include 1) to "inspect" all the active mines in the State, 2) to
oversee the abandoned mine program, and 3) administer mine land reclamation. The inspections cover
"the operation, conditions, safety appliances, machinery, equipment, sanitation and ventilation, the
means of ingress and egress, the means taken to protect the lives, health and safety of the miners, the
cause of accidents and deaths occurring at the mine, and the means taken to comply with the" other
provisions of the law.
In short, this is a regulatory agency intended to enforce the regulations governing producing mines
for the health and safety ofthe miners. By statute the Mine Inspector's office is not allowed to comment
on "ore, ore bodies, or values, of any mine or part thereof."
In contrast, the Department of Mines and Mineral Resources is intended "to assist in the
exploration, development and exploitation ofthe State's mineral resources". Thus, we are a service
agency, which gathers economic data, publishes mineral resource information and cooperates with the
mine owners, exploration companies, mining companies, and government land agencies to help them
develop the industry and, thereby, contribute to the economy of the State.
The duties of the Geological Survey is to furnish the public with data about the State's geologic
setting, to describe the rocks and soils and to map the same, perform investigations related to the field,
and to control and manage the laws and policies pertaining to oil, gas, helium, and geothermal resources.
The Survey looks at mineral deposits as they exist in a broad geologic setting, while our Department
researches specific deposits for their mineral potential and is the State's official repository of
information on mineral deposits. The Survey is primarily non-regulatory, but it administers the Oil and
Gas Conservation Commission, which is regulatory.
Sunset Review 2005 - Arizona Department of Mines and Mineral Resources 7
There is no duplication or conflict between the Department of Mines and Mineral Resources and the
Geological Survey. In 1999, Dr. Larry Fellows, then Executive Director of the Arizona Geological
Survey, but who has since retired, testified to the Legislature that there was no duplication between the
two agencies.
The Department assists both of these agencies as the need arises. The Department serves the Mine
Inspector's abandoned mines program with its historic data and underground maps, and also tracks the
industry activity for that office. The Geological Survey has been supplied with data on mineral
resources, mines, and suggested areas for geologic mapping.
These activities are in accordance with our statutory obligations.
4. An assessment of the consequences of eliminating the agency or of consolidating it
with another agency.
(See also the response to Number 10 above)
The Department serves a valuable purpose in keeping the mining industry active in the State and to
sustain mineral discovery. Its existence as a State agency conveys to many capital groups the State's
desire for exploration and mining. Arizona has a history of being rich in minerals, which were the initial
enticement for settlement of the area. Without help from the Department, new investment in Arizona's
mineral industry would dwindle. Industry would receive the message that the State is not interested in
their contribution to the economy.
In addition, other groups with whom we cooperate would suffer by not having our historical data to
call upon for land use planning and management decisions. These include state, federal, and Indian land
managers, environmental investigators, the financial community, archeologists, and the technical, as
well as, the historical researchers. The small mine operators and entrepreneurs, and the out-of-state
mining community would lose a guide to the mineral resources, including the labyrinth of mineral rights
regulations, industry and service connections, and permitting requirements.
Elimination of the Department of Mines and Mineral Resources would result in a decline in
exploration, mine jobs, and tax revenues derived from mining and the large service industry associated
therewith. The rural economies would feel the loss most strongly.
Eradication of the Museum would strip the State of one of the finest mineral collections in the West.
Consolidating the Museum with another agency would dilute or eliminate the fundamental message that
the Museum delivers so well- that mining is necessary for civilization, that it is done in an
environmentally responsible manager, and that the United States is dependent on Arizona's remarkable
mineral deposits.
Arizona competes with other States in trying to attract financial resources for mineral development.
As it stands, Arizona's investment in the Department of Mines and Mineral Resources is relatively low
compared to adjoining States. In some respects the Department's work is similar to that of tourism.
Tourism thrives with advertisement. Chambers of Commerce serve a similar purpose. The Department
helps the mining and exploration community learn about all the mineral opportunities that Arizona has
to offer.
8 Sunset Review 2005 - Arizona Department of Mines and Mineral Resources
Attachment #3
Meeting Notice
Interim agendas can be obtained via the Internet at http://www.azleg.state.az.us/lnterimCommittees.asp
ARIZONA STATE LEGISLATURE
INTERIM MEETING NOTICE
OPEN TO THE PUBLIC
SENATE NATURAL RESOURCES AND RURAL AFFAIRS COMMITTEE AND
HOUSE OF REPRESENTATIVES NATURAL RESOURCES AND AGRICULTURE
COMMITTEE OF REFERENCE
FOR THE SUNSET HEARING OF
THE DEPARTMENT OF MINES AND MINERAL RESOURCES
Time:
Date: Wednesday, September 21, 2005
1:30 p.m.
Place: House Hearing Room 3
AGENDA
1. Call to Order
2. Opening Remarks
3. Sunset - Department of Mines and Mineral Resources
• Presentation by the Department of Mines and Mineral Resources
• Public Testimony
• Discussion
• Recommendations by the Committee of Reference
4. Adjourn
Members:
Senator Marilyn Jarrett, Cochair
Senator Marsha Arzberger
Senator Tim Bee
Senator Robert Blendu
Senator Robert Cannell
9/6/05
jmb
Representative Russ Jones, Cochair
Representative Cheryl Chase
Representative Ann Kirkpatrick
Representative John Nelson
Representative Tom O'Halleran
People with disabilities may request reasonable accommodations such as interpreters,
alternative formats, or assistance with physical accessibility. If you require accommodations,
please contact the Chief Clerk's Office at (602) 926-3032, TOO (602) 926-3241.
Attachment #4
Minutes of Committee of Reference
Meeting
ARIZONA STATE LEGISLATURE
Forty-seventh Legislature - First Regular Session
SENATE NATURAL RESOURCES AND RURAL AFFAIRS COMMITTEE AND
HOUSE OF REPRESENTATIVES NATURAL RESOURCES AND AGRICULTURE
COMMITTEES OF REFERENCE
FOR THE SUNSET HEARING OF
THE DEPARTMENT OF MINES AND MINERAL RESOURCES
Minutes of Meeting
Wednesday, September 21,2005
House Hearing Room 3 -- 1:30 p.m.
Chairman Jones called the meeting to order at 1:35 p.m. and attendance was noted by the
secretary.
Members Present
Senator Bee
Senator Blendu
Senator Jarrett, Cochair
Senator Arzberger
Senator Cannell
Members Absent
Speakers Present
Representative Chase
Representative Kirkpatrick
Representative Jones, Cochair
Representative Nelson
Representative O'Halleran
Kathi Knox, Majority Research Analyst, House Natural Resources and Agriculture Committee
Megan Gnagy, Majority Assistant Research Analyst, House Natural Resources and Agriculture
Committee
Doug Martin, Arizona State Mine Inspector
Rose Ellen McDonnell, Interim Director, Arizona Geological Survey
Jon Spencer, Senior Geologist, Arizona Geological Survey
Madan Singh, Director, Arizona Department of Mines and Mineral Resources
Richard Bark, Attorney, representing Phelps Dodge
Jerry Haggard, representing self
Ted Eyde, representing self, Tucson
Chuck Bentzen, Hydrotex
Sydney Hay, Executive Director, Arizona Mining and Industry Get Our Support; Arizona
Mining Association
Bryan Wilson, President/Chief Executive Officer, St. Genevieve Resources Limited; SGV
Resources Incorporated, Montreal, P.Q., Canada
Krishna Parameswaraw, Environmental Affairs, Asarco LLC
COR SUNSET REVIEW
AZ DEPT OF MINES & MINERAL RESOURCES
September 21,2005
(Chairman Jones recognized a person in favor of continuation of DMMR who did not speak,
page 7)
Larry Fellows, representing self
Fred Brost, President, Mining and Environmental Consultants, Peoria
Dave Ridinger, Chairman, Board of Directors, Arizona Department of Mines and Mineral
Resources
Richard Lundin, Charles A. Hoffman Foundation
At Chairman Jones' request, the Members introduced themselves.
PRESENTATIONS
Kathi Knox, Majority Research Analyst, House Natural Resources and Agriculture Committee,
explained the sunset review process.
Megan Gnagy, Majority Assistant Research Analyst, House Natural Resources and Agriculture
Committee, related the duties of the Arizona Department of Mines and Mineral Resources
(DMMR) as outlined in A.R.S. §27-102:
• Promote development of mineral resources in the state.
• Conduct studies of the economic problems ofprospectors and small mines.
• Maintain archival information in the mineral museum.
• Provide quality mining data.
• Make surveys of potential economic mineral resources.
• Conduct field and other investigations.
• Serve as the center of mining information.
• Publish and distribute information and data.
• Cooperate with several related state and federal agencies, such as the State Geologist, the
Arizona Geologic Survey (AGS), and the State Land Department (SLD).
• Oppose congressional acts favoring reciprocal or duty free imports of foreign material.
• Use its authority in other ways to assist in more extensive exploration and development
of mineral resources in Arizona.
Chairman Jones stated that he asked the AGS and State Mine Inspector to make brief
presentations on their purpose and function in relation to DMMR.
Doug Martin, Arizona State Mine Inspector, stated that DMMR is very unique. When mining
was affluent in the state, over 1,500 mines were in operation that went out of production from
1940 to 1942. Exploration companies came to the state looking for mines that were productive
in different minerals, but information on mining was scattered. From 1971 to 1973, mining and
geological engineers in the state visited every mining engineer widow and asked for an
endowment of their husband's papers and maps, which were deposited at DMMR where an
employee developed a program to computerize the records and maps. This information is
invaluable, not to mention the museum, which shows people how important minerals are to the
state.
COR SUNSET REVIEW
AZ DEPT OF MINES & MINERAL RESOURCES
2 September 21,2005
In relation to his office, Mr. Martin conveyed that 43 ostriches were missing from the ostrich
farm near Pinnacle Peak and could not be found for weeks. He asked DMMR for a record of
mines, tunnels, or shafts in the area. DMMR gave him the exact location of three abandoned
mines where he found every ostrich huddled in cool tunnels. Also, a suspect accused of killing
his wife and two children ran off toward Payson and supposedly hid in abandoned mines. That
information was gleaned not only from his office records on active mines, but also from DMMR.
Mr. Martin said his office receives calls on a daily basis from people asking where mines are
located that can be purchased, where to look for silver, etc., and DMMR has the information.
The importance of the historical data for their Abandoned Mines Program is invaluable in that
the mining companies contribute to the Abandoned Mine Fund, and hopefully, the State
Legislature will match the fund this year, so those damages can be secured. DMMR has a place
in state government and is invaluable not only to his office, but to law enforcement agencies,
petroleum, gas and mineral production, and the mining industry.
Rose Ellen McDonnell, Interim Director, Arizona Geological Survey (AGS), stated that the
mission of AGS is to inform and advise the public about the geological character of Arizona,
help meet societal needs for water, energy, and mineral resources, and assist in prudently
managing the state's land and natural resources. AGS staff perform several important functions
for patrons who include governmental agencies, elected officials and staff, environmental and
engineering geology firms, hydrologists, energy and mineral resource exploration and production
companies, consultants, planners, property owners and potential buyers, attorneys, realtors,
insurance companies, tourists, teachers, students, book dealers, professional society citizen
groups, and interested individuals. AGS informs and advises the public by answering questions,
selling maps and reports, maintaining a geology library and databases, giving talks, and leading
field trips. AGS also maps and characterizes rock formations, surficial materials, and mineral
and energy resources. AGS describes and monitors potential hazards in the state and limitations
to land and resource management, such as earthquakes, flooding, land subsidence, earth fissures,
landslides, debris flows, and rock solution. AGS also provides support for the Arizona Oil &
Gas Conservation Commission.
When Ms. Kirkpatrick asked if AGS interfaces with the u.S. Geological Survey (USGS),
Ms. McDonnell responded that USGS provides funding for AGS' state geologic mapping
program, and AGS works with the USGS on the state geological database. She indicated to
Chairman Jones that AGS receives calls concerning mining records or production reports that are
referred to DMMR.
Chairman Jones asked how AGS' library and database differ from that at DMMR.
John Spencer, Senior Geologist, Arizona Geological Survey, conveyed that the AGS library
focuses on geologic literature, whereas DMMR's information and databases focus on mining
information. An exploration company in Arizona looking to explore for gold or copper would
focus on existing districts where there has been past production and would be interested in
geologic information that can be obtained from AGS, as well as information about past mining
activity that can be obtained from the DMMR.
COR SUNSET REVIEW
AZ DEPT OF MINES & MINERAL RESOURCES
3 September 21,2005
Madan Singh, Director, Arizona Department of Mines and Mineral Resources, introduced
DMMR staff. He stated that he joined DMMR on August 15,2005 and related his background
experience. He gave a slide presentation about DMMR and requested two changes to the
statutes:
• Regarding language stating that DMMR shall oppose duty free imports of foreign
minerals, fees on imported materials is outdated since free trade is the current policy of
the federal government; hence, this language should be deleted.
• To discourage legal actions against DMMR, A.R.S. §27-102(A)4 should be changed to
read, "Provide quality mining data, evaluation and assistance relating to mineral
development to the public, legislature, and federal, state, county and other government
agencies." The following or a similar clause should also be added, "Employees and staff,
including the director and the board, of the department shall be immune from personal
liability with respect to acts done and actions taken in good faith within the scope of its
authority." Analogous clauses occur in other agencies.
Mr. Singh said he believes there is a strong case for continuation ofDMMR for the next 10 years
in order to continue providing current and quality data to a rapidly changing world, make
information globally accessible through expanded use of the Internet, assist new mining ventures
to explore Arizona's mineral deposits, obtain and enhance exhibits for the museum to encourage
visitors and students, and increase the outreach program.
At Chairman Jones' request, he proceeded to review responses to the #1 and #2 factors for the
Sunset Review (Attachment 1).
Chairman Jones indicated that DMMR has a very small budget, so it is amazing what is done
with such limited resources, especially with only $100 provided for travel. Mr. Singh responded
that staff often spend their own money on travel because money is not available in the budget.
Much information needs to be collected in the field, but the budget for travel is limited in state
and out of state. Today, the mining industry is global as many mines are owned by people from
abroad, so data needs to be presented to a global audience. As much as possible is done on the
Internet, but that is not always possible, so for the first time last year, a meeting was attended in
Toronto to present information. Staff often ride with other people or whatever, but sometimes it
is quite difficult to function with limited resources.
Senator Blendu asks ifDMMR promotes the development of mineral resources of the state, etc.,
according to statute. Mr. Singh replied that DMMR does most of it. Senator Blendu advised of
a problem with monitoring facilities at some of the mining operations that are set off when dust
storms occur, resulting in noncompliance with Arizona Department of Environmental Quality
(ADEQ) standards. He asked if DMMR could tell ADEQ that the dust storms are causing the
problem. Mr. Singh responded that DMMR goes to ADEQ when permits are requested, but he is
not aware of a particular case where a mine was closed because of dust storms. As far as dust
and health components of the mining product, the State Mine Inspector would be in a better
position to address ADEQ.
Chairman Jones asked who the advocate is for a potential investor in the state with respect to
dealing with other agencies like ADEQ. Mr. Singh responded that prior to development of the
COR SUNSET REVIEW
AZ DEPT OF MINES & MINERAL RESOURCES
4 September 21,2005
mine, DMMR would help navigate the various agencies as far as permits, etc. Once the mine is
operating, DMMR monitors production and economics, but various other agencies become
involved that the investors deal with directly. If the mining companies ask for DMMR's
assistance, DMMR would help, but most of their work is done prior to the mine starting out.
Chairman Jones noted that DMMR publishes pamphlets and newsletters and asked if most are
directed at attracting potential clients to the state or informational. Mr. Singh answered that
some are informational, but others are strictly to attract people to the state. The Prospectors and
Developers Association of Canada (PDAC) International Conference in Toronto was strictly for
promotional purposes. Staff went to Spokane last year and plan to go again this year. The intent
is to select meetings that can help development.
Chairman Jones asked if other statutory changes should be made so DMMR has the resources to
carry out its charges. Mr. Singh responded that DMMR is certainly appreciative of any
resources that can be obtained because some things could be done better or in more detail. For
example, economic studies require going into the field, which can take some time. DMMR does
not have the resources to do that, but often has to rely on mining companies and related entities
to provide information. He submitted that the statute covers more areas than DMMR has
resources for. The two changes he suggested are based on the fact that taxing of imported
lllirlerais is obsolete, and at one time, legal action was taken against the department and
personnel. Fortunately, no money had to be given to the individual, but he would like to avoid
such incidents in the future. Often these things happen when mineral prices are high, as they are
now, and people want to take advantage.
Chairman Jones said he was very impressed with the museum and packets prepared for the
teachers. The statute only states that DMMR will have a museum, so perhaps there should be
some elaboration about activities and outreach in education. Mr. Singh responded affirmatively,
noting that DMMR depends on revenues from a small gift shop to pay some of the people who
work in the museum, and many volunteers work with the department, but to purchase new
specimens, some of which are very expensive, DMMR must depend on people's generosity,
nonprofit organizations, etc. More resources would enhance the quality and number of
speCImens.
Senator Jarrett surmised that DMMR may be the only agency that is not reimbursed for travel
and asked for an estimated amount. Mr. Singh answered that $7,200 was spent to attend the
PDAC Conference because a booth had to be set up and at least two people needed to attend.
The University of Arizona helped man the booth because DMMR could not afford to send more
than two people. He suggested $20,000 or more.
Chairman Jones remarked that if the statute requires an agency to perform certain duties, the
agency needs the resources to carry those out or the statute should be changed to be compliant.
Mr. Singh pointed out that DMMR has an annual budget of $800,000, but about half is paid to
the state for rent, so there is only $400,000 to work with.
COR SUNSET REVIEW
AZ DEPT OF MINES & MINERAL RESOURCES
5 September 21,2005
PUBLIC TESTIMONY
Richard Bark, Attorney, representing Phelps Dodge, stated that he is in support of continuation
of DMMR for 10 years. The agency does a good job in serving the public and schoolchildren
who visit the museum. He indicated to Chairman Jones that the DMMR structure works well
with the State Mine Inspector as the regulatory body and coordinates effectively with the AGS to
meet the company's needs. He agreed with Senator Jarrett that the agency could use more
funding for travel.
Jerry Haggard, representing self, said he is legal adviser to a number of mining companies in
Arizona in strong support of continuation of DMMR for another 10 years (Attachment 2).
During the past 35 years, he and his clients consistently received timely, competent, and accurate
assistance from DMMR. He recommended clarification of DMMR's authority to advise the
public making inquiries in order to put some kind of objective evaluation on particular projects
marketed in Arizona.
Ted Eyde, representing self, Tucson, expressed support for continuation ofDMMR for 10 years.
He said he is an independent geologist who specializes in marketing of specialty and
performance minerals. He also operates and owns specialty clay operations near
Kirkland Junction and Baghdad, Arizona. These are minerals that were not known before. AGS
is a good place to begin obtaining information, but often the deposits are buried in the geological
data and it takes a while to sort them out. He related that there are two new ground calcium
carbonate (ground up marble) operations in Arizona, one near Superior owned by a Swiss
company, and another south of Tucson owned by a French company. A third company from
Germany wants to get in the business and is looking at a deposit near Dragoon. In every case, a
trip to DMMR led the companies to establish businesses in Arizona.
When Senator Blendu asked if American companies benefit from the process, Mr. Eyde
responded that foreign companies recognize the growth of the industrial minerals business and
own more industrial minerals operations than domestically-owned companies.
Chuck Bentzen, Hydrotex, stated that having failed retirement, he started a small business.
Networking is very important to sales, so the people at DMMR need more money to travel and
obtain information. He said there is no better place for a person looking for information with a
buying industry than DMMR where the people are very dedicated. The state is fortunate to have
these people looking out for its interest in continuing economical development of the mining
potential in Arizona. Not only does DMMR deserve a hearty endorsement for another 10 years,
but the travel budget should also be increased.
Sydney Hay, Executive Director, representing Arizona Mining and Industry Get Our Support;
Arizona Mining Association, stated that the Arizona Copper Association conducts a study every
year about the direct and indirect impact ofthe copper industry on the state's economy reflecting
personal income, business sales, and state and local government revenues. In 2004, the latest
report released, the total economic impact was $3.3 billion. The industry depends on DMMR to
maintain important databases of mining properties reflecting mineral potential, ownership,
technical guidance, and metallurgical information, and the limited staff have always been helpful
and responsive. She added that the most important service DMMR provides is the educational
COR SUNSET REVIEW
AZ DEPT OF MINES & MINERAL RESOURCES
6 September 21,2005
component. Schoolchildren go through the museum and learn that without minerals, there would
be no houses, cars, computers, phones or lights, and without the mines, there would not be any
minerals. She urged the Members to continue DMMR.
Bryan Wilson, President/Chief Executive Officer, St. Genevieve Resources Limited; SGV
Resources Incorporated, Montreal, P.O., Canada, said the companies became involved in
Arizona about a year ago when they were in a position to acquire the Zonia Mine near Prescott
and the Emerald Isle Mine in Kingman. Working with the people at DMMR and even ADEQ
has been a breath of fresh air. This is the most open and welcoming jurisdiction he has
encountered in many years in the mining industry. He urged the Members to continue the
agency and beef up the budget for educational purposes and archiving of historical information
into electronic format so it can be retained for a longer period of time.
Senator Blendu welcomed Mr. Wilson to Arizona.
When Chairman Jones asked how he found out about the resources in Arizona, Mr. Wilson
responded that the mining history in the state is well-known. Over the past 10 or 15 years, a
massive globalization has gone on in the mining industry. He and colleagues have gone to far
places like Russia and Africa looking to develop mineral resources, but there is not a better place
than North America and a state like Arizona to have a mining business. The language is the
same as in Canada, the culture is essentially the same, and the bodies of law are common, so it
makes sense to conduct business here as opposed to other places in the world where business is
not transparent, or in some cases, legitimate. He added that DMMR is well documented, but that
does not mean the agency does not need to be improved.
Ms. Chase asked ifthe state is the only source of funding for DMMR. Mr. Singh replied that the
primary source of funding is the state. A small amount is generated from the gift shop and some
companies provide donations, but that involves going hat in hand to various companies asking
for money. He indicated to Senator Blendu that even though the businesses are owned by
foreign companies, the workers are American.
Senator Blendu remarked that there is presently a problem in Arizona obtaining aggregate or
cement, so freeway projects are being delayed even though funding is available. He will talk to
Mr. Singh about the issue after the meeting.
Ms. Chase remarked that DMMR does a wonderful job.
Chairman Jones asked how much of the money raised from the gift shop and donations is used to
meet expenses mandated in statute. Mr. Singh replied that only about $100,000 to $150,000 is
raised in donations, so it is not a lot. Money from the gift shop often is used to pay people for
working in the gift shop and purchasing materials to sell. Sometimes the funds are raided,
perhaps a few thousand dollars, but there is not a lot to raid.
KrishnaParameswaraw, Environmental Affairs, Asarco LLC, stressed the importance of the
educational component ofDMMR. He said an educated populace is needed and the place to start
is with schoolchildren because the more they know about mining, an industry that is of such
importance to Arizona, the better off they will be. The museum component is also important
COR SUNSET REVIEW
AZ DEPT OF MINES & MINERAL RESOURCES
7 September 21, 2005
where mining industry people obtain information needed to carryon business. He added that the
statute says DMMR is to run the museum, so perhaps more interactive exhibits for children
should be considered, which has aided the education process in Asarco' s Mineral Discovery
Center in Tucson. He urged the Members to continue DMMRfor another 10 years.
Chairman Jones noted that Rusty Bowers, Arizona Rock Products Association, is in favor of
extending DMMR, but does not need to speak.
Larry Fellows, representing self, stated that he recently retired as State Geologist for AGS.
DMMR provides more site specific information about individual properties, whereas AGS's
emphasis is on regional items. Generally, mineral exploration companies start off with
geological data, and as they focus in on other areas of more interest, get specific about individual
mine information, etc. He related that neither agency is regulatory. While he was at AGS, there
was a very close working relationship with members of the mineral exploration community, and
at one time, there were three advisory committees. Mr. Eyde was a member of one such
committee, which had 13 senior members with a combined total of 400 years of experience who
identified providing basic geologic maps as the most useful function of AGS.
He said in relation to funding, when there is a limited amount an agency is forced to set
priorities, do what it can do best with the money that is available, and then try to get more money
later. AGS went with geologic mapping because it is important to mineral exploration users and
there was also an opportunity to obtain funding through a national program with USGS. The
AGS budget for FY 2005 was close to $800,000 from the General Fund, but between $500,000
and $600,000 was brought in from outside funds, contracts with USGS, the SLD, the Forest
Service, the Army Corps of Engineers, and other groups that had funding if staff went out and
beat the bushes for it, which helped a lot. He submitted that DMMR is unique because it is the
only agency in the country he is aware of that promotes development of minerals, but does not
regulate minerals. What is done in Arizona by AGS and the DMMR is done in other states by
the state geological survey.
Mr. Fellows opined that the functions DMMR performs are extremely valuable and
recommended continuation; however, there is the potential to do much better and be more
effective. He made the following suggestions to the enabling statutes for the museum:
• Define what the museum is to do.
• Give the museum more visibility, perhaps renaming it the Polly Rosenbaum Mineral &
Mining Museum.
• Authorize the museum to use volunteers and make extensive use of volunteers.
• There is no authorization to operate the gift shop.
• Authorize soliciting of funds.
• Authorize the ability to enter into cooperative agreements with agencies like ADEQ and
SLD.
• Define the educational role.
Mr. Fellows said with regard to the statutory duties for DMMR, consideration should be given to
whether or not to continue some functions that are not being done, such as conducting studies of
COR SUNSET REVIEW
AZ DEPT OF MINES & MINERAL RESOURCES
8 September 21,2005
the economic problems of prospectors of small mine operations. He has not seen that done for
quite a while and it would be helpful for promoting development of mineral resources. Another
is to make surveys of potential economic mineral resources. If a study of calcium or limestone
was conducted, for example, a publication showing where limestone deposits are, how thick,
etc., would be very useful in getting people to visit and look at the resources. He added that field
investigations are extremely important and were done on a regular basis when he first started at
AGS, but he does not know why their importance has declined.
In conclusion, Mr. Fellows said he believes the Mineral Museum and Mine Information Center
are doing important jobs and should be continued, but both have the potential to be much more
effective. The Enabling Act needs to be overhauled. Consideration might be given to the word
"promotion," since almost everybody who develops properties needs to know quite a bit about
the geologic setting, so taking full credit for those kinds of things is somewhat shaky. He
believes more collaboration is needed between AGS and DMMR, and therefore, recommends
appointing the State Geologist to the Board of Governor's as an ex officio member. With those
changes, he believes DMMR could better serve the state and prioritize what is going on in a
much more efficient and effective manner.
Ms. Kirkpatrick said she believes there is general enabling language allowing agencies to enter
into intergovernmental and cooperative agreements. Senator Blendu said there is permissive
language in the absence of prohibition. He understands whoever created the language wanted to
keep DMMR insulated from certain things. There is a difference between obtaining outside
funding and contracting with the Corps of Engineers, so caution is needed in crafting language.
Senator Jarrett noted that David Thomas with Legislative Council is in the audience who assured
her that there is enabling language for IGAs.
Fred Brost, President, Mining & Environmental Consultants, Peoria, testified that his company
provides engineering permitting services to the mining industry, primarily in Arizona, and is
currently working on development of projects related to gold, copper, uranium, limestone,
gypsum, decorative stone, and sand and gravel. DMMR is a very valuable asset for mining
companies. Through consultation with the professional staff at DMMR and reviewing their
unique records, a number of his clients were directed to valuable mineral deposits. While not all
have been developed into mines yet, the companies spent millions of dollars with Arizona
geologists, mining engineers, metallurgists, hydrologists, archeologists, biologists, and attorneys
in the pursuit of developing these properties. When some of the properties are developed, a
substantial contribution will be made to the economy of the local community and state.
He indicated that non-mining companies also benefited from the services of DMMR. A few
years ago, a developer wanted to develop an old mining property near Payson and put in upscale
housing, but the levels of arsenic in the soil were too high. The developer was afraid the arsenic
levels were due to a spill from the mining operation and the developer could be tagged with a
cleanup bill. Mr. Brost knew mining was not responsible, and through research at DMMR and
site work, he was able to prove that the arsenic was strictly naturally occurring. The arsenic
levels were low enough that there was not any kind of hazard, so the development proceeded.
Also, many of the old mines have collapsed and the entrances were closed, so information can be
found at DMMR about the underground workings on property someone wants to develop.
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AZ DEPT OF MINES & MINERAL RESOURCES
9 September 21,2005
Mr. Brost stated that he often seeks advice on everything from mining prospects to claim staking
from the professional staff at DMMR. It is a marvelous resource that serves the state well. One
of his first memories of the City of Phoenix is a fifth grade class trip to the Mineral Museum,
which started him on his career in the minerals industry. He stated that rather than eliminating
DMMR, he would like to see its budget increased in order to fully catalogue the mining files that
were recently donated and continue to bring files into the digital age. He would also like DMMR
to have sufficient funding to visit existing mining operations of properties as in the past. He
endorsed the changes requested by Mr. Singh and clarification of the word "promotion."
David Ridinger, Chairman, Board of Directors, Arizona Department of Mines and Mineral
Resources, said he is a mining engineer who believes DMMR's budget should be doubled. He
pointed out that Arizona is a mining state. DMMR is not responsible for every new operation,
but the agency helps, and he strongly recommends giving DMMR another 10 years.
Richard Lundin, Charles A. Hoffman Foundation, said one thing that has not been brought out is
the fact that the assay data on the location of mining portals, the workings, and tunnels, is the life
flow of the mining industry. In California, he asked the geological survey for information back
from the 1870s and l880s, but it had been thrown away. The DMMR, and before that the
ArIzona Bureau of Mines, which was the predecessor to the AGS, kept the data, which would be
lost if the agency were sunsetted, as well as the potential for future mining in Arizona. As a
historical archeologist, he has been productively using the data at DMMR for 30 years. He was
trained as a geologist and archeologist, practiced as a mineral exploration consultant and
exploration manager, and he has had a good working relationship with DMMR.
He asked the Members to increase DMMR's budget so the agency can complete the process of
acquiring all of the Arizona Department of Transportation's (ADOT) geologic and sampling data
on sand and gravel and aggregate resources, which was gathered at considerable cost to
taxpayers of Arizona and the U.S. government, so it can be put on microfilm or CDs and kept at
DMMR with a copy at ADOT, and so SLD mineral resource data can be compiled. He said he
productively used data from DMMR to find three producing properties, one of which is the
largest aggregate quarry in Yavapai County currently and will provide the quarry and aggregate
needs for the people in Yavapai County until the next century.
Mr. Singh thanked the Committee for the time spent on hearing DMMR's case.
DISCUSSIONIRECOMMENDATIONS
Chairman Jones said from his research and discussions with Dr. Singh and other people, he
believes what the museum has been able to do in education should be expanded. A lot is done
with very little and the archival information is an extremely valuable resource. Some changes
were recommended to the statute and enabling language so DMMR could do more cooperative
work and have access or seek outside additional funding. Although the Committee does not
recommend the budget, in looking at what the agency is tasked to do and the resources that are
provided, he believes DMMR is set up for failure unless the resources are provided or the
statutes are changed.
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AZ DEPT OF MINES & MINERAL RESOURCES
10 September 21, 2005
Senator Jarrett moved, seconded by Ms. Chase, that the Committee continue
DMMR for another 10 years and legislation be worked on. In addition, she
asked that people get together and come forward with recommendations for
legislation to improve DMMR tasks by December 1, 2005. The motion
carried.
Without objection, the meeting adjourned at 3:35 p.m.
Linda Taylor, Committee Secretary
September 30, 2005
(Original minutes, attachments, and tape are on file in the Office of the Chief Clerk.)
COR SUNSET REVIEW
AZ DEPT OF MINES & MINERAL RESOURCES
11 September 21,2005
Attachment #5
Spreadsheet of statutory changes
discussed at the meeting held
October 10, 2005
Attachment 5: Spreadsheet of statutory changes discussed at the meeting held October 10, 2005.
Discussion Item
1. Educational outreach activities ­statewide,
schools, mining
interests.
2. Interagency and
intergovernmental agreements ­with
agencies and universities.
3. Interagency cooperation and
information sharing.
4. Museum operations and gift
shop.
5. Managementof archived
material.
Related Statutes
A.R.S. § 27-102 A, 1. Promote the development of
the mineral resources and industry of this state by
participating in conferences, seminars, forums,
speaking engagements, public news media and other
functions necessary to achieve its objectives.
A.R.S. § 27-105, 8. Enter into cooperative
agreements with the federal government and its
agencies or with any mining agency created by the
law of any state for the purpose of carrying out this
article.
A.R.S. § 27-102, A, 8. Cooperate with the State Land
Department to encourage mining activity on state
lands.
9. Cooperate with the Corporation
Commission in its investigations and administration
of laws relating to the sale of mining securities.
10. Cooperate with the State Geologist and
deliver to the Arizona Geological Survey problems
which the field work of the department shows to be
within the scope of the activities of the Arizona
Geological Survey.
11. Cooperate with federal and other agencies
in matters related to developing mineral resources in
this state.
A.R.S. § 27-102 A, 3., (c) A mineral museum as the
state depository for collecting, cataloging and
displaying mineral specimens of various ores,
gemstones, lapidary material and other valuable
mineral specimens. The director may establish
entrance fees to the museum for persons who are at
least eighteen years of age.
(does not include gift shop authority or
regulations)
A.R.S. § 27-102 A, 3., (a) An information bank and
library of mineral and mining information, including
Proposed Changes to Statute
No changes necessary
- Include state agencies and universities.
- Authorize contracts between private entities
Add the following entities:
- Non-profit economic development
organizations.
- Department of Commerce, universities, State
Mine Inspector and ADEQ
- Other museums, gem and mineral clubs
Replace "Cooperate" with another word.
"Assist governmental agencies within the scope
of requirements and budget."
- Add authority for gift shop
- Expand to include all mines not only
"underground."
6. Volunteers.
7. Budget and rent.
books, periodicals, films, videotapes and individual
mine files.
(b) Underground mine map repository files, mining
district data and an archive of mine data.
No statutes currently authorizing
A.R.S. § 27-102 B. A mines and mineral resources
fund is established consisting of monies received
pursuant to subsection A, paragraph 3, subdivision (c)
and paragraph 7 of this section and section 27-105,
paragraphs 6 and 7. Monies in the fund are
continuously appropriated to the department for
purposes of administration of this article, and monies
in the fund are exempt from the provisions of section
35-190 relating to lapsing of appropriations.
A.R.S. § 27-105 5. Purchase necessary office equipment
and rent or lease necessary office space.
A.R.S. § 27-111 A. Monies received from any source
by the department shall be deposited, pursuant to
sections 35-146 and 35-147, in the mines and mineral
resources fund established by section 27-102. Monies
received pursuant to section 27-105, paragraphs 6 and
7 shall be credited to a special account in the fund,
designated as the department of mines and mineral
resources account, to be used by the department in
accordance with the provisions of section 27-105,
paragraph 6 or 7, as appropriate. Monies received
pursuant to section 27-102, subsection A, paragraph 3,
subdivision (c) shall be credited to an account in the
mines and mineral resources fund to be used for
operations of the mineral museum. Monies obtained
from the sale of publications under section 27-102,
subsection A, paragraph 7 shall be credited to the
department's printing revolving account in the fund
for printing further publications. Monies in the
department's printing revolving account that at any
time are in excess of ten thousand dollars shall
immediately revert to the state general fund.
- Include information in a format to be
determined by the Director (digital etc.)
- Store the information in a place that will be
safe in the event of a disaster
- authorize the use of volunteers and their
associated expenses (travel etc.)
- Provide in statute to remove the rent
requirement. Still require the DMMR to pay
for maintenance and utilities.
- Authorize the Board of Governors to lease
office equipment in addition to purchasing.
(Should technical equipment be included in
with the office equipment?)
- Rent is being charged at 100% for an 80%
complete building. Use admission fees to
offset the rent cost.
8. Ability to charge fees for
serVIces.
9. Responsibility for promotion of
Arizona mineral resources.
10. Studies, analysis and field
investigations.
11. Cap on publication monies
account.
12. Grants, contracts etc.
13. Immunity
A.R.S. § 27-102, A., 3., (c) A mineral museum as the
state depository for collecting, cataloging and
displaying mineral specimens of various ores,
gemstones, lapidary material and other valuable
mineral specimens. The director may establish
entrance fees to the museum for persons who are at
least eighteen years of age.
A.R.S. § 27-102, A., (1) Promote the development of
the mineral resources and industry of this state by
participating in conferences, seminars, forums,
speaking engagements, public news media and other
functions necessary to achieve its objectives.
A.R.S. § 27-102 2. Conduct studies of the economic
problems of prospectors and operators of small mines
for the purpose of assisting in their solution and
investigate their properties to assist in development.
5. Make surveys of potential economic
mineral resources and conduct field and other
investigations which may interest capital in the
development of the state's mineral resources.
A.R.S. § 27-111 B. Monies in the department's
printing revolving account up to an amount of ten
thousand dollars and monies in other accounts in the
mines and mineral resources fund are exempt from the
provisions of section 35-190 relating to the lapsing of
appropriations.
A.R.S. § 27-105 6. Accept gifts, bequests or legacies
ofreal or personal property, or any other contribution,
financial or otherwise, for use in accordance with the
direction of the donor, or, in the absence of an express
direction, to be disposed of for the best interests of the
state. Monies received pursuant to this paragraph
shall be deposited in a separate account of the Mines
and Mineral Resources Fund established by section
27-102.
No statutes currently addressing this issue
- Authorize the DMMR to charge fees for
services (could be problematic to be in
"competition" with the private sector)???
- Change "promote" to "support"
- This section needs to be cleaned up.
- May need to cut these two requirements and
put them in a more appropriate place.
- Increase the cap on the fund to $20,000 or
some other amount as recommended by the
DMMR.
- Include the authorization to apply for grants
and contracts (see Arizona Geologic Survey
Statutes as a model A.R.S. §27-152.01)
- Provide for personal and agency immunity
from liability.